Snapshot Summary…

Global FX: The dollar fell further and approaching the 100-level

Global Rates: The UST closed mixed with gains slated to the front-end part of the curve

MYR Bonds: Local govvies remained subdued yesterday and ahead of the new benchmark MGS 07/34 auction

USD/MYR: The ringgit strengthened further as sentiment remained driven by the weaker dollar

Macro News

United States: The Dallas Fed's general business activity index for Texas' service sector dropped to -7.7 in August from -0.1, while the revenue index remained relatively stable at 8.7. The employment index showed little change, holding at 0.6, indicating nearly no shift in employment levels from July.

On another note, in August 2024, the Consumer Confidence Index (CCI) increased to 103.3 from 101.9 in July, indicating a more positive consumer outlook despite ongoing labour market concerns. The Present Situation Index, reflecting current business and labour conditions, rose to 134.4 from 133.1. However, consumers were slightly less optimistic about future income and stock market performance, with fewer expecting stock price increases and more anticipating declines. Inflation expectations dropped to 4.9%, the lowest since March 2020, suggesting cautious optimism amid economic uncertainties.

United Kingdom: The Confederation of British Industry (CBI) reported that the monthly retail sales balance in the UK rose to -27 in August from -43 in July. However, it fell short of market expectations of -11 and is still the second-weakest figure since April. British retailers experienced a third consecutive month of declining sales in August and anticipated further declines in September. Additionally, they are reducing hiring and investment plans due to weak demand.

Fixed Income

Global Bonds: The UST saw a steepening move as gains were seen on the front end to the mid part of the tenors (2Y – 7Y) after good demand from the USD69 billion 2Y auction. On the other hand, we noted losses on the belly to the end part of the curve. The 2Y yield fell by more than 3 bps, while the 10Y yield climbed by about 2 bps. The mixed performance came after data showed mixed developments; the consumer confidence index improved, but the house price index eased slightly. In Europe, the Bund bear steepened with a 10Y yield rising 4 bps on the day.

MYR Government Bonds: Local govvies remained subdued yesterday due to a lack of market catalyst, while there will be an auction of MGS 07/34 (new 10Y benchmark) later today. Meanwhile, W.I. was last quoted at 3.775/750%, where the level was tightened by 2-3 bps from the previous day with nothing done so far. Improved global market sentiment post Jackson Hole, shift to a new 10Y benchmark, decent tendersize for a 10Y benchmark, and potential for nominal yields to decline are the positives for this auction.

MYR Corporate Bonds: Flows in the corporate space were healthy at MYR705 million despite subdued movement on govvies. Among notable trade was MYR10 million on PLUS 01/31 (AAA) done at 3.819%, MYR10 million on Tanjung Bin Energy 09/31 (AA3) done at 3.959%, and MYR30 million on UEM Sunrise 02/34 (AA-) done at 4.028%.

Forex

United States: The dollar fell 0.3% on the day, further approaching the 100-level market players eye the release of key US data before month-end on Friday.

Europe: The currency market continued to be dictated by expectations of incoming Fed rate cuts as the dollar fell after the prior day’s safe-haven demand. The euro and pound ended flat overnight. There was some cautious trading in Europe’s currencies amid the run-up in oil prices due to ongoing Middle East geopolitical risks.

Asia Pacific: The CNY fell yesterday. The sentiment was affected by news that Canada is imposing a 100% tariff on electric vehicles and a 25% tariff on steel and aluminium from China. In data news, industrial companies reported a 3.6% y/y increase in profits to CNY 4,099 billion from January to July 2024. Meanwhile, amid ongoing USD weakness, the USD/JPY fell 0.4% to close at 143.96. There was little else in terms of fresh drivers to guide JPY. Aside, the AUD fell from recent highs as sentiment grew cautious before today’s release of the July CPI, which could show a slower reading on the back of rebates to electricity bills.

Malaysia: The ringgit strengthened further as sentiment remained driven by the weaker dollar amid the Fed speculation. However, we think there was some caution ahead of more US data this week, especially the PCE inflation print. The USD/MYR was a modest move of 0.02% to close at 4.348.

Other Markets

Gold: Gold remained supported by rate cut expectations. However, gains were pared on suspected profit-taking activity, and the USD was also lower. Gold closed 0.3% higher at USD2,525 per oz.

Crude oil: Prices fell from weekly highs. WTI was down 2.3% and Brent by 2.4%, closing at USD75.53 per barrel and USD79.55 per barrel, respectively. Though at hefty daily declines, the lower prices were due mainly to profit-taking pressures after oil's recent rallies on the back of Middle East tensions. News reports indicate shipments from Russia are being boosted due to the resumption of output from the country's select eastern coast facilities. Russia's four-week average exports rose by 60k to 3.26 million barrels in the week ended 25 August.

Source: AmInvest Research - 28 Aug 2024